The pace of wage growth is the highest it has been in over two decades. Yet it is still insufficient to keep up with inflation.
The average wage, including and excluding incentives, increased by 6.4% between September and November of 2021 and 2022, according to government data.
It is the fastest gain since 2001, excluding the height of the Covid recession. Yet when adjusted for inflation, wages declined by 2.6%.
The disparity in salary between the public and private sectors is also close to a record level.
According to the Office for National Statistics, private sector earnings increased 7.2% annually in the three months leading up to November, which was more than double the 3.3% increase in the public sector (ONS).
In recent months, thousands of workers in both industries have gone on strike over pay and working conditions. Because their wages have not kept pace with the rising cost of living.
Train services, postal delivery, and hospital treatment have all been affected by industrial action. And more strikes are expected in the coming weeks.
In November 2022, 467 thousand working days were lost due to strikes, the greatest number in almost a decade.
On Wednesday and Thursday, members of the Royal College of Nurses (RCN) in England will go on strike. While on January 23 some ambulance employees in England and Wales will walk out.
Pay climbs fastest in 20 years
Energy and food prices are soaring, primarily as a result of the conflict in Ukraine, at the fastest rate in over four decades. Currently, inflation, the rate at which prices increase, stands at 10.7%.
The director of economic statistics at the ONS, Darren Morgan, stated that the “actual worth” of people’s wages was continuing to decline, with regular earnings falling at the quickest rate since records began.
It is difficult for some businesses, particularly smaller ones, to raise wages by inflation while also having to pay for increased energy costs, as a result of which workers have demanded salary increases.
In addition, worker shortages in certain industries have forced corporations to offer increasingly appealing compensation packages, while the number of open positions remains at historically high levels.
Leanne Wayne, proprietor of Little Explorers Day Nursery in Golcar, just outside of Huddersfield, is proud to pay above the National Living Wage, which is at present £9.50 per hour for those aged over 23 but will increase to £10.42 in April.
“I’d like to increase my employees’ pay to reflect how hard they work,” she added. They deserve it.
She cautioned, though, that such a decision was not simple. Leanne noted that the inability to raise salaries has made it “difficult” to recruit new, qualified employees.
Leanne is preparing to raise the nursery’s prices once again in the spring, as she did last year.
Despite fears of economic stagnation, the employment rate in the United Kingdom has remained relatively stable. While the unemployment rate has risen little.
Prime Minister Rishi Sunak has committed to cut inflation in half this year. Which many economists believe will occur as the price of oil declines.
Salary growth is predicted to be more rapid
The greatest approach to help people’s earnings go farther, according to Chancellor Jeremy Hunt, is to adhere to the government’s plan to combat inflation. He cautioned, “We must avoid doing anything that could permanently instill high costs in our economy.”
However, Jonathan Ashworth, Labour’s shadow work and pensions secretary. Stated that the government had any proposals for addressing the cost of living crisis.
The Bank of England has steadily increased interest rates to curb growing costs. Increasing interest rates makes borrowing money more expensive. Theoretically, this encourages individuals to borrow and spend less while saving more.
Ashley Webb, the UK economist with Capital Economics, stated that the fact that the labor market remained tight and wage growth remained robust “would only heighten the Bank of England’s concerns that inflation, despite dropping, is still persistent.
In times of high inflation, salary growth is predicted to be more rapid than in times of low inflation.
The average wage increase of 6.4% (both including and excluding bonuses) may be the highest in financial terms. But because each pound is worth less and less, it is one of the largest pay decreases in real terms of the 21st century.
In contrast to the public sector, it is evident that wage increases in the private sector are driven by employers battling with market forces in the form of one of the tightest labor markets in decades.
Those with the greatest demand for personnel, such as those in the professional, scientific, and technical fields, are bidding up wages. Employers are aware that ignoring market forces in the labor market would result in an inability to attract the necessary workforce. And these market forces are at work throughout the entire economy, in both the public and private sectors.
